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Exchange Regulations

Non-Resident Indian or NRI refers to a person of Indian origin staying in a different global location for employment/carrying on business or vocation. They are spread across the world with an estimated population of 40 to 100 million. Most of the NRI populate have migrated to alien countries for better job prospect and future but with the advent of global MNCs (Multinational companies) and implementation of revised foreign policies in India, the NRIs are driven to become a part of this fastest emerging economy.

To encourage this initiation of NRIs to resettle and return back to India, they are granted facilities like maintenance of bank accounts and investments in immovable properties in India. To appreciate the interest of NRIs in India's immovable properties, the government of India has come up with beneficial investment policies for the NRIs. The Reserve Bank of India allows them to acquire, hold, transfer or dispose off land by way of sale or inheritance. Such properties are meant for the purchaser's bonafide residential use and they are purchased through normal banking channels/home loans or NRE and FCNR.

Exchange Control Regulations

In recent years, India has been witnessing unprecedented growth in the real estate sector fueled by the increased business activity. Real estate development in India is estimated at $12 billion and growing at 30% every year. Though all segments of real estate business such as corporate, retail and residential have been driving this growth, investment in residential property itself constitutes 80% of this sector.

Non-Resident Indians (NRIs) are one of the key contributors to the growth of the real estate industry and considering the immense potential in India, they are likely to step-up the investment in future. The Indian government has considerably eased the restrictions relating to investments by NRIs in house property. There is virtually no restriction or approval required for an NRI to invest in properties in India from funds received in India through normal banking channels or held in Non-Resident External (NRE) account/ Foreign Currency Non-Resident (FCNR) account (B)/ Non-Resident Ordinary (NRO) rupee account. However, investment in agricultural land / plantation property / farm house is currently prohibited. The recurring rental income earned on letting out of property is also freely repatriable.

Consequent to the liberalization in Exchange Control policy and procedures, certain relaxations in the existing regulations and procedures governing the acquisition, holdings, etc. of immovable property in India, have been announced. Immovable property may be a residential house, a residential flat or a plot of residential house. The current position therefore is as under:

1.1. Non-resident Indian holding Indians passport do not require any permission from RBI for acquiring Immovable Property for bona fide residential purposes, as section 31 of FERA 1973 is not applicable to them.

1.2. Non-resident Indians holding Indian passport may pay the purchase consideration either by remittance of funds from abroad through normal banking channels or out of NRO Account or out of NRE Account or out of FCNR Account.

1.3.As per the recent relaxation RBI has granted General Permission to Non-resident Indians holding Foreign Passport (i.e. Foreign Citizens of Indian Origin) to acquire, hold, transfer or dispose of by way of sale or inheritance immovable properties situated in India provided;

  • the property is for the purchasers bona fide residential purpose.
  • the purchase consideration is met either by remittance of funds from abroad through normal banking channels or out of NRE/FCNR Account or out of FCNR Special Account
  • income accruing by way of rent from the properties purchased or acquired by inheritance will have to be credited to the non-resident ordinary (NRO) account even if the purchase consideration was met out of NRE / FCNR Account.

1.4. Foreign citizens of Indian origin are however required to declare the properties to RBI within a period of 90 days from the date of purchase in Form IPI 7. The following documents must be submitted along with the declaration.

  • A certified copy of the purchase deed or a certificate from the Co-operative Housing Society or an Association of the apartment owners as an evidence of transfer / registration of the property in the declarant"s name.
  • Certificate from the declarant"s bankers in India evidencing receipt of inward remittance(s) in Foreign exchange through normal banking channel or withdrawal of funds from the declarant"s NRE / FCNR account / FCNR Special Deposit Account and payment of consideration for the property out of those funds.

1.5. Where a Foreign Citizen of Indian origin wishes to acquire a property out of funds held in NRO Account then the aforesaid general permission does not hold and a prior permission from RBI will be required which can be applied for in Form IPI.1.

1.6. Where a Foreign Citizens of Indian origin wishes to acquire a property from the sale proceeds of another property prior permission of RBI is essential and may be obtained by applying in Form IPI I.

1.7. Any number of properties can be acquired by a non-resident Indian regardless of whether they are holding Indian passport provided they are required for bona fide residential purposes.

An Overview

Below is an overview of the key exchange control regulations that should be considered by NRIs while investing in house property in India:

  • No permission is required by non-resident Indian nationals to acquire immovable property in India.
  • Foreign nationals of Indian origin, whether resident in India or abroad, have been granted general permission to purchase immovable property in India.
  • The purchase consideration should be met either out of inward remittances in foreign exchange through normal banking channels or out of funds from NRE/FCNR accounts maintained with banks in India.
  • The non-resident Indians who are staying abroad may enter into an agreement through their relatives and/or by executing the Power of Attorney in their favor as it is not possible for them to be present for completing the formalities of purchase (negotiating with the builder or developer, drafting and signing of agreements, taking possession, etc.) These formalities can be completed through some known person who can be given the Power of Attorney for this purpose. Power of Attorney should be executed on the stamp paper before the proper authorities in foreign countries. Power of Attorney cannot be drafted on the stamp paper bought in India.
  • The foreign nationals of Indian origin are required to file a declaration in form IPI 7 with the Central Office of Reserve Bank at Bombay within a period of 90 days from the date of purchase of immovable property.
  • Such property can be sold to another foreign national of Indian origin provided funds towards the purchase consideration are either remitted to.
  • Such residential properties can be given on rent. But such income cannot be remitted abroad and will have to be credited to the ordinary non-resident rupee account of the owner of the property.

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